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Find the latest accounting, industry and business news, trends and updates here.

Consider a different route: 4 accounting alternatives that may reduce financial reporting costs

Many privately held construction companies prepare audited financial statements that comply with Generally Accepted Accounting Principles (GAAP) as established by the Financial Accounting Standards Board (FASB). They do so, at least in part, to satisfy the requirements of lenders, sureties and other business partners. Many of GAAP's requirements benefit private businesses and their financial statement [...]

Soggy numbers – 6 common accounting mistakes to avoid

You’re probably familiar with the term “crunch the numbers.” Well, in a tumultuous industry like construction, it’s all too easy to let crisp, timely financials go soggy with outdated data and flat-out mistakes. Here are six common accounting errors to avoid. Inaccurate allocation of overhead To develop a realistic picture of your job costs — [...]

Show me the money: Ways to keep your profits on track

While the U.S. economy continues to improve, contractors must carefully watch their bottom lines. This means keeping track of how increases — or decreases — in profitability can affect your construction company. The following are ways for your company to maintain its profitability. Review your overhead “Overhead” or “indirect costs” — expenses that aren’t directly [...]

“BEST” PRACTICES IN CLAIMS MANAGEMENT

Over the past 3 decades our firm has observed contractors in dispute with owners over failure to be compensated for changed conditions, extra work, and extended home office overhead due to delays.  In our experience, a sophisticated contractor tries to avoid claims by managing change orders proactively but even the most astute and sophisticated contractor [...]

Get ready for new lease accounting rules

Earlier this year, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2016-02, the FASB’s long-awaited overhaul of its lease accounting rules. The ASU makes extensive changes to the treatment of lease transactions, particularly for lessees. What do the new rules require? The most significant change involves operating leases. Under current Generally [...]

How to self-insure your construction business

With all of the risks inherent in a construction business, it’s important that you have sufficient insurance coverage. But you also need to keep policy costs under control. Captive insurance can be a great way to do both. The benefits With captive insurance, you establish a subsidiary company to self-insure your business. Bigger companies may [...]

Prequalification reduces risk of subcontractor default

General contractors can no longer afford to just award subcontracts to the lowest bidder. In today’s challenging economy, some subcontractors bid on jobs that are outside their comfort zones in terms of skills, capacity or financial resources. In today’s world, prequalifying subcontractors is essential to ensure that subcontractors have the wherewithal to complete their work [...]

Don’t neglect the cost to complete

On long-term construction projects, it’s critical for contractors to have systems in place to accurately estimate the cost to complete (CTC). Knowing a project’s CTC helps you develop a more accurate picture of the project’s performance to date, avoiding surprises that can hurt your profitability and shake the confidence of lenders and sureties. By getting [...]

Is your construction company at risk? Understand how to account for claim revenue

As you know, the IRS takes great interest in your construction company’s revenue — and particularly how and when it’s received. If you encounter unanticipated income, also known as “claim revenue,” you might find yourself in hot water with the taxing authorities. So, the question is: Are you at risk? Know the rules to avoid [...]

What to Tie Together to Insure Complete, Accurate Financial Reporting

Balancing your construction firm's financial statements is similar to balancing your personal checkbook -- except there are more variables. Sometimes, missing or forgotten transactions will come to light. Without them, the statements probably don't tie together. This article explains some of the issues involved in balancing financial statements, along with some of the pitfalls. Click HERE [...]

Check your company’s financial pulse with a WIP report

After a project is completed, it’s useful to perform a “postmortem” to not only analyze what went right and what went wrong, but also apply what you learn to improving performance on future projects. But what about current jobs? Using work-in-process (WIP) reports, you can monitor vital signs while jobs are in progress [...]

Surviving the economic recovery depends on your cash flow

As the economy continues to improve, many construction companies are shifting from survival mode into growth mode. That’s good news, but it’s critical for contractors to take a cautious approach to growth. According to Thomas C. Schleifer, a professor at Arizona State University’s Del E. Webb School of Construction, the failure rate for construction companies [...]

Employee Benefits Plan Audits, Who is at Risk?

In May 2015, the Department of Labor (DOL) released the results of its recent study in which it assessed the qualifications of Employee Benefit Plan (EBP) auditors. The study revealed a shocking decline in the quality of the audits, indicating that 39% of the EBP audits in the sample did not comply with professional audit [...]

A look at the “fraud triangle” and beyond

Occupational fraud continues to wreak havoc on businesses around the globe, with annual losses for the typical organization estimated by the Association of Certified Fraud Examiners at 5% of revenues. Fraud experts have long suggested that the presence of three conditions, known as the "fraud triangle," greatly increases the likelihood that an organization will be [...]

Do you know where your company stands financially?

All business owners (including contractors) need to get a handle on where their companies stand in relation to the past and to others in their respective industries. Unfortunately, too many contractors fail to do so and, as you can imagine, this can undermine their bottom lines. Fortunately, there are ways to keep track of key [...]

Use operational audits to identify opportunities and problems

Numbers don’t lie, but they also don’t fully reveal whether a business is performing at its best. Financial statements, for example, can only show a problem, not identify its cause. As a result, contractors who want to take full stock of their businesses should consider undergoing an operational audit. Beyond figures During an operational audit, [...]

Profits can go up or down: Which way are yours headed?

As the U.S. economy continues to improve, it is critical that contractors stay on top of their bottom lines. That, of course, will require that you fully understand what a hit to your profitability can do to your construction company. Here are some key items you simply can’t ignore if you want to stay in [...]

Calculating the true cost of labor

When bidding on projects, it’s critical to understand your true labor costs. For most construction companies, employee compensation is the single largest expense — so even small errors in calculating labor rates can lead to substantially inaccurate estimates. Two keys to developing accurate labor rates are: 1) factoring in all direct and indirect costs associated [...]

Impressing your surety: what are the financial indicators that interest them?

Contractors understand the need to look good in the eyes of their bonding providers. But with the ups and downs in construction, it can be difficult to demonstrate that you deserve a solid “thumbs up.” So how can you impress your surety that your bonding capacity is all that it should be? Read on. What [...]

Accounting for long-term contracts: Understanding look-back is in your best interest

In today’s economy, it’s important to pay close attention to the look-back method. If you use the percentage-of-completion method (PCM) to account for long-term contracts, it’s not unusual for income to be overstated for previous years. If that’s the case, the IRS may owe you some interest. But income might instead be understated under PCM, [...]